It’s hard to exaggerate just how explosive the residential real estate market was in South Florida in 2021.
Florida cities top every list for rent growth in the country, while the luxury segment keeps hitting new records, and new development condos are sold out before plans are even dry. And multifamily investment sales are right in line with all the hullabaloo, with capital pouring in from investors new and old, local and global, mom-and-pop and institutional.
In South Florida, there were at least 25 multifamily sales above $100 million in 2021, and six above $200 million, all of them edging out the top contender in 2020, which totaled $180 million. Even more importantly, no sales in 2020 exceeded $400,000 per unit, while more than 10 properties sold above that price in 2021, five of which went for more than $500,000 per unit.
The higher rents are largely driven by population growth, primarily of higher-income transplants, as well as by the piping hot housing market, which may be pricing out homebuyers who have to then rent instead. The upside for real estate investors is obvious: lower cap rates and the promise of even higher rents as time goes on.
A note of caution is necessary, however, as a frothy market has its downsides. For one, expenses are rapidly increasing, from rising insurance costs in the wake of the Surfside collapse and other catalysts, as well as rising construction costs as a result of supply chain limitations and inflation.
“We are seeing anywhere from 20 to 30 percent increases across all lines of business, which is pretty much unprecedented for the last 50 years,” said Ryan Cassidy, managing director of insurance services at Franklin Street. “Property, general liability, and excess liability are all at an all-time high at the same time.”